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SB 376

Incomplete gift nongrantor trusts: Personal Income Tax Law.

2025-2026 Regular Session Introduced by Suzette Valladares

SB 376 clarifies California income tax treatment of incomplete gift nongrantor trusts, reducing uncertainty for estate planners and high-net-worth individuals using advanced tax strategies.

Chaptered by Secretary of State. Chapter 410, Statutes of 2025.
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Bill Summary · SB 376

Legislative bill overview

SB 376 modifies California's Personal Income Tax Law to clarify the tax treatment of "incomplete gift nongrantor trusts" — trusts where the grantor retains certain powers or interests but intends to make a gift. The bill provides specific guidance on when these trusts are taxed as separate entities versus when income is attributed to the grantor.

Why is this important

This legislation addresses a significant gap in California tax code that created uncertainty for high-net-worth individuals and estate planning professionals. By clarifying tax treatment, the bill reduces disputes with the California Department of Taxation and Franchise Tax Board while providing clarity for those using advanced estate planning strategies to minimize gift and estate tax liability.

Potential points of contention

  • Revenue impact concerns: The clarification may reduce state tax revenue if it enables taxpayers to structure incomplete gifts in ways that defer or reduce tax obligations
  • Complexity and accessibility: The technical nature of incomplete gift trusts means primarily wealthy individuals benefit, raising equity questions about whether the tax code favors sophisticated planners
  • Compliance burden: Tax administrators may face challenges implementing consistent standards across incomplete gift trust scenarios with varying fact patterns

Compiled from official sources — confirm details with the bill’s official record.

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